)
The progress on US debt ceiling talks, domestic inflation numbers and second quarter earnings of companies are expected to keep investors busy in the truncated trading week ahead. Financial markets will be shut on Wednesday on account of Bakri Id. Though investors expect US' political parties to reach upon a resolution on the debt ceiling, market participants said if the discussions are go down to the wire it would hurt sentiment. In 2011, a similar showdown between the parties was resolved due to some last minute negotiations but it led to ratings agency Standard and Poor’s stripping the US of its top-notch credit rating on August 05, sparking a sharp sell-off across global markets.
“In the last of couple of days, the general feeling pervading the market is that there will be an amicable resolution on the issue. The proof of that is the rally that we have seen across global markets. There is no precedent that says that the US could default on its interest obligations. So, the market rests assured,” said Sachidanand Shukla, economist at Axis Capital. The BSE Sensex through the week has risen by 3.1% to close on Friday at 20,528. The NSE Nifty gained 3.2% to end at 6096.
Shukla said if an amicable resolution is not arrived at, the consequences could be ‘disastrous’ as there would be huge risk-aversion moves across markets globally.
Such an event could also see foreign flows into the country stopping abruptly. “Foreign institutions have been and will keep investing in Indian markets as the overall sentiment in the market has been positive over the past few days. But flows could stop abruptly only if there is some unfavourable decision regarding the debt ceiling,” said Sudip Bandyopadhyay, MD & Chief Executive Officer at Destimoney Securities.
FIIs were net buyers at Rs 3,133 crore through last week while DIIs were net sellers at Rs 1,823 crore.
Analysts expect a weak start to the week owing to the lacklustre industrial production data released on Friday after market hours. The government will release the September inflation data-both consumer and wholesale- on Monday.
“The IIP numbers have been disappointing and market could open weak on Monday. But the inflation numbers coming out on the same day would be more keenly watched,” said Kaushik Dani, head of equity, Peerless Mutual Fund.
A lower inflation number would be cheered by the markets as it could keep the RBI from further hiking the repo rate. But a higher inflation figure could see the key policy rates being tightened by the RBI in its October 29 policy review, market-men said.
Among key earnings, Reliance Industries' September-quarter results announcement on Monday will be closely watched. The numbers are expected to be largely in-line with market expectations. Any deviation from the same could swing the markets either way owing to the stock’s large weightage in the broader market BSE Sensex (8.7%) and the NSE Nifty (7.2%).
Other big names which are expected to announce results next week are HDFC bank, IndusInd Bank, TCS, L&T and Bajaj Auto, among others.
Market participants are confident that the TCS results on Tuesday will not spring any negative surprise especially since Infosys results on Friday beat Street expectations. With stakes being high on the TCS stock, any negative surprise on that front could hit the stock hard, cautioned analysts.
The outlook for private banking stocks is better than that of the PSU bank stocks. Results in the banking sector will be split between the private and PSU sector banks. PSU sector results could be burdened by the declining quality of the NPAs. Private sector banks have further been split into borrowers and lenders in the overnight market. The RBI’s move in July to raise the marginal standing facility could see margins of banks like IndusInd bank, one of the largest borrowers, being squeezed.
Technical analysts said that the market was showing bearish trends.
“The rally in the top 6-7 stocks in the Nifty has made the overall trend in the Nifty bullish. However, the broader market outlook is still bearish,” said Shardul Kullkarni, senior technial analyst, Angel Broking.
“Traders can initiate shorts if the Nifty slips below 6045 (Nifty spot level). Then, going forward it could fall to 5875. On the upside if Nifty crosses 6150-levels, it could touch 6220-levels,” he added.
